Barriers to entry in the healthcare markets: Winners and Losers from certificate-of-need laws. (October 2021)

• Record Type: Journal Article
• Authors: Baker, Matthew C.; Stratmann, Thomas
• Is Part Of: Socio-economic planning sciences. Number 77(2022)
• Publication Date: 2021-10
• Subjects: Barriers to entry -- Certificate-of-need laws -- Medical imaging services -- Health care -- Healthcare -- Medicare; I180; Planning -- Periodicals; Economic policy -- Periodicals; Social policy -- Periodicals; Planification -- Périodiques; Politique économique -- Périodiques; Politique sociale -- Périodiques; ECONOMIC PLANNING; SOCIAL PLANNING; DECISION-MAKING; 361
• DOI: 10.1016/j.seps.2020.101007
• Languages: English
• ISSNs: 0038-0121

Abstract

Abstract: In states with Certificate of Need (CON) laws, medical services providers must file an application and demonstrate community need before being permitted to start or expand a service. We examine CON laws for magnetic resonance imaging (MRI), computed tomography (CT), and positron emission tomography (PET) scanners to test the hypothesis that the approval process favors established incumbent hospitals over new hospital entrants and nonhospital providers. Using Medicare claims data in 2013, we find that states with CON laws have 20 to 33% fewer providers, depending on the type of scanners to which the laws apply. As a result, residents of CON law states are 3.4–5.3 percentage points more likely to travel outside their home county to obtain imaging services than residents of non-CON states. In addition, there is a notable shift in the type of provider: CON laws are associated with 27–53% fewer scans by nonhospital providers per beneficiary, 23 to 70% fewer by new hospitals, but 6 to 21% more scans in older hospitals. Highlights: States requiring imaging services certificate-of-need (CON) laws have affected the provider type composition of the market. CON laws are correlated with reductions in services provided by new hospitals and non-hospitals but not by pre-existing hospitals. CON state residency is related to a higher likelihood of traveling outside one's home county to obtaining imaging services.